Jackson, TN asked in Bankruptcy, Small Claims and Banking for Tennessee

Q: what happens if i don’t pay off my collection/charge off debt?

there’s 3 different charges, one going back 3 years. i heard that they go away after “7 years off being on your credit report.”

3 Lawyer Answers
W. J. Winterstein Jr.
W. J. Winterstein Jr.
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: Broad question- "what happens to whom?"

A financial institution's "charge-off" is an internal accounting and regulatory function; a charge-off by your lender in no way affects or reduces your legal obligation to repay the debt.

The length of time an "adverse item" stays on your credit report is largely up to the credit bureau that shows it. That might be five, seven or more years. And when the account is referred to an outside collection agent, the agent's claim against you may appear on your credit report, in addition to the creditor who originally extended credit to you.

As a general matter, the banking and loan industry devised the current credit score scheme back in the '90's, at the same time that the bankers and credit card issuers were heavily lobbying ($$) Congress to change the Bankruptcy Code. Ten years later, in 2005, the Republican-controlled Congress made several changes to the Bankruptcy Code, most of which benefit the banking industry and card-issuers.

By the time the Bankruptcy Code was amended, the banking industry no longer needed the changes, because it has self-corrected, by keying a borrower's ability to get credit and the interest rate to the credit rating set by the credit bureaus.

The system is designed, and operates, to force people with lower credit ratings to pay more (higher interest) to cover the lenders' risk of loss (through non-payment or bankruptcy or death, etc.). And that system rewards those with higher ratings, in the opposite ways.

Most credit counselors will strongly advise you to resolve an unpaid debt appearing on your credit report (often by "settling" with the creditor for a lesser amount), because over time you will pay far more for your mortgage or credit cards or car loans than it will take to get rid of the adverse postings to your credit reports.

Timothy Denison agrees with this answer

Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: It remains due snd owing for up to 15 years. Whether someone attempts to collect it is another story.

Anthony M. Avery
Anthony M. Avery
PREMIUM
Answered
  • Knoxville, TN
  • Licensed in Tennessee

A: The Creditor can sue upon the debt within 6 or10 years of the last payment on each of the 3 debts. The SOL's depend on whether it was a demand or installment obligation.

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